The Board of Governors of the US Federal Reserve System voted unanimously to approve a 3/4 percentage point increase in the primary credit rate to 1.75 percent, effective June 16, 2022. This is said to be the highest rate increase since 1994.
“In taking this action, the Board approved the request to establish that rate submitted by the Board of Directors of the Federal Reserve Bank of Minneapolis”, the US central bank said in statement posted on its website.
Futher rate hikes are excepted in a bid to tame inflation.
“Overall economic activity appears to have picked up after edging down in the first quarter. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures,” an FOMC statement released this afternoon explained.
“The invasion of Ukraine by Russia is causing tremendous human and economic hardship. The invasion and related events are creating additional upward pressure on inflation and are weighing on global economic activity. In addition, COVID-related lockdowns in China are likely to exacerbate supply chain disruptions. The Committee is highly attentive to inflation risks,” it added.
“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 1‑1/2 to 1-3/4 percent and anticipates that ongoing increases in the target range will be appropriate,” the statement concluded.